Sirius XM, upsized NXP and Vereit megadeals total $3.75 billion; new Sirius XM trades actively

By Paul Deckelman and Paul A. Harris

New York, May 18 – The big deals took over the high-yield primary market on Wednesday as issuers priced three offerings of at least $1 billion, accounting for all of the day’s new-deal activity.

By the time the dust had settled, a total of $3.75 billion of new dollar-denominated and fully junk-rated paper had come to market in five tranches from domestic or industrialized-country issuers.

According to data compiled by Prospect News, Wednesday’s new-issue volume was the third-biggest of any session so far this year, trailing only the $8.13 billion that priced in five tranches on April 6, most of which was due to one giant-sized offering of more than $5 billion from French cable and telecommunications company Numericable-SFR SA, and the $3.9 billion that got done in four tranches on April 29, dominated by Irish glass-packaging maker Ardagh Group’s big five-part offering, three of which were dollar-denominated.

Wednesday’s big deal came from Dutch semiconductor manufacturer NXP BV, which priced an upsized, quick-to-market $1.75 billion of paper in two tranches of five years and seven years.

Vereit, Inc., a real estate asset manager, also did an upsized two-part deal as a regularly scheduled forward calendar offering consisting of $1 billion of five- and 10-year notes.

And satellite radio broadcaster Sirius XM Holdings, Inc. drove by with a $1 billion single-tranche 10-year transaction.

In the secondary market, traders saw active dealings in the new Sirius XM paper, which had priced earlier in the session than the other two offerings, but the new bonds were anchored right around their issue price.

There was also brisk volume in Tuesday’s split-rated six-year issue from Irish aircraft-leasing company AerCap Holdings NV as well as recent purely junk-rated deals from the likes of Aramark Services, Inc., Cheniere Corpus Christi Holdings, LLC, HanesBrands, Inc. and, going back a little further, Western Digital Corp.

Overall, the market was lower, in line with other fixed-income markets, as debt investors digested the minutes of the April meeting of the Federal Reserve’s policy-setting Federal Open Market Committee, with the consensus belief being that the central bank is poised to start raising interest rates again next month.

Statistical market performance measures turned lower across the board on Wednesday after having been mixed on Tuesday.

NPX brings $1.75 billion

In the day’s largest offering, NXP and NXP Funding LLC priced an upsized $1.75 billion two-part issue of non-callable senior notes (Ba2/BB+).

The deal included $850 million of five-year notes that priced at par to yield 4 1/8%. The yield printed in the middle of the 4% to 4¼% yield talk.

In addition, NXP priced $900 million of seven-year notes at par to yield 4 5/8%. The yield printed in the middle of the 4½% to 4¾% yield talk.

The size of the combined issuance was increased from $1 billion.

Joint physical bookrunner Barclays will bill and deliver. Goldman Sachs & Co. was also a joint physical bookrunner. BofA Merrill Lynch, Citigroup Global Markets and Deutsche Bank Securities Inc. were joint bookrunners.

The notes come with an investment-grade covenant package, consistent with the company’s existing senior notes due 2021 and 2022.

Vereit upsizes to $1 billion

Vereit priced an upsized $1 billion of non-callable senior notes (Ba1/BB+) in two tranches on Wednesday, according to a market source.

The deal was twice upsized. Early Thursday the offering increased to $800 million from $500 million.

In addition to the upsizings, a second, shorter-maturity tranche was added.

The company priced $400 million of five-year notes at par to yield 4 1/8%, at the tight end of yield talk in the 4¼% area, and $600 million of 10-year notes at par to yield 4 7/8%, at the tight end of yield talk in the 5% area.

J.P. Morgan Securities LLC, Barclays, Citigroup, Capital One, Goldman Sachs and Morgan Stanley & Co. LLC were the joint bookrunners.

Sirius XM upsizes too

Sirius XM priced an upsized $1 billion issue of 10-year senior notes (Ba3/BB) at par to yield 5 3/8% on Wednesday, according to a market source.

The deal size was increased from $750 million.

The yield printed at the tight end of yield talk in the 5½% area.

JPMorgan, BofA Merrill Lynch, Barclays, Citigroup, Deutsche Bank Securities Inc., Goldman Sachs, SunTrust Robinson Humphrey Inc. and Wells Fargo Securities LLC were the joint bookrunners for the Rule 144A for life offering.

Telecom Italia, Synlab price

In the European market, Telecom Italia SpA launched and priced a €1 billion issue of 10-year senior notes (Ba1/BB+/BBB-) at par to yield 3 5/8% on Wednesday, and Synlab Ltd. priced a €190 million add-on to its Euribor plus 500 basis points secured floating-rate notes due July 1, 2022 (B2/B+) at 99.5 in a private placement on Tuesday.

Hanesbrands to price Thursday

Hanesbrands Inc. talked its €450 million offering of non-callable eight-year senior notes (Ba1/BB) to yield 3½% to 3¾%, a market source said on Wednesday.

The official talk comes in line with earlier guidance in the mid-to-high 3% yield context.

The Rule 144A and Regulation S offering is set to price on Thursday.

Active bookrunner Barclays will bill and deliver for the Rule 144A and Regulation S offering. BofA Merrill Lynch, HSBC and JPMorgan are the joint bookrunners.

Gogo sets Thursday call

Gogo Intermediate Holdings LLC plans to participate in an investor conference call beginning at 12:30 p.m. ET on Thursday, according to a syndicate source.

The company seeks to place $500 million of senior secured notes due 2022.

Morgan Stanley, JPMorgan and BofA Merrill Lynch are the joint bookrunners for the Rule 144A for life offering. Evercore and UBS Investment Bank are the co-managers.

Vivint talk is 7¾%-8%

APX Group, Inc., the holding company of Vivint, Inc., talked its $350 million offering of senior secured notes due Dec. 1, 2022 (B1/B) to yield 7¾% to 8%, according to a syndicate source.

Official talk comes tight to the 8% initial guidance, a market source said.

Books close at 11 a.m. ET on Thursday, and the Rule 144A and Regulation S with registration rights offering is set to price thereafter.

Credit Suisse Securities (USA) LLC, HSBC, Macquarie Capital and Mizuho are joint bookrunners. Other syndicate names are expected to be announced at a later time.

Yum! Eyes $2.3 billion

Yum! Brands, Inc. announced in a Wednesday press release that it plans to sell $2.3 billion of senior notes.

The notes are part of an overall $4.6 billion of new debt that the Louisville company plans to use to optimize its capital structure in advance of the planned separation of its China business.

The financing will also include $2.3 billion of new bank debt. A bank meeting is scheduled to take place in New York on Monday.

Nexans starts roadshow

Paris-based Nexans began a roadshow on Wednesday for a €250 million offering of five-year senior notes (expected BB-), according to a market source.

The roadshow wraps up on Thursday, and the Regulation S deal is set to price thereafter.

Credit Agricole CIB, JPMorgan and Natixis are the global coordinators. Commerzbank and Nordea are the joint bookrunners.

Secondary market gets Sirius

In the secondary arena, traders saw considerable activity in the new Sirius XM 5 3/8% notes due 2026, noting that the New York-based satellite and internet radio broadcasting company’s quickly shopped megadeal had priced earlier in the session than the day’s other two offerings.

A trader said that over $40 million of the notes changed hands, the most of any purely junk-rated issue. He pegged the bonds going home right at their par issue price.

A second trader said that when the issue first broke, it was “trading below issue price” at 99¾ bid.

However, a few minutes later in the session, he said the bonds were “doing a little better” in a par to 100 1/8 bid context.

Several other traders also saw the Sirius bonds trading in a narrow range on either side of par.

The company’s existing 6% notes due 2024 were meantime seen by a market source trading off ¼ point at an even 106 bid, with about $9 million of volume.

AerCap issue active

AerCap’s new 3.95% notes due February 2022 were also among the most active issues of the session.

That split-rated (Ba1/BBB-/BB+) $1 billion offering was being quoted right around the 99.813 issue price – equivalent to 270 bps over Treasuries – at which the Dublin-based aircraft leasing company’s megadeal had priced on Tuesday to yield 3.988%.

That would be down from the 100 1/8 level where the bonds had been seen going home on Tuesday.

More than $51 million of the bonds traded on Wednesday, almost double the more than $27 million of those notes that had changed hands on Tuesday.

Traders said that most of the interest in the quickly shopped offering – which had priced through the company’s AerCap Ireland Capital Ltd. and AerCap Global Aviation Trust financing subsidiaries – was likely coming from high-grade accounts playing in the crossover market rather than traditional junk bond investors.

Recent issues busy

A trader said – only half in jest – that there were just “too many new issues.”

Some of the recently priced offerings were among the day’s busiest bonds, another market source said.

For instance, he saw Aramark’s new 4¾% notes due 2026 trading at 100 1/8, which he called about unchanged on the day, on volume of over $19 million.

Another trader said that both tranches of that $1 billion two-part offering, which had come to market as a drive-by deal on Monday, “were a little heavy,” versus where they had been trading on Tuesday.

He saw the 4¾% notes right around par, while the add-on to its 5 1/8% notes due January 2024 was around 103¾ bid.

On Tuesday, the 4¾% notes had been trading in a 100 1/8-to-100¼ bid context, while the add-on bonds had been at 104 bid.

Aramark, a Philadelphia-based provider of foodservice, facilities management and uniform supply services, priced its big deal evenly split into two $500 million tranches.

The add-on to its existing $400 million of 5 1/8% notes priced at 103.75 to yield 4.364%.

The 4¾% 10-year notes had priced at par.

Elsewhere among the recently priced deals, one of the traders saw the new Cheniere Corpus Christi 7% senior secured notes due 2024 finishing at 101¾ bid, down ¼ point on the day, with over $12 million traded.

The company, a unit of Houston-based liquefied natural gas transportation, storage and marketing services company Cheniere Energy, Inc., priced $1.25 billion of those notes at par last Thursday after the regularly scheduled forward calendar offering was upsized from an originally announced $1 billion.

The bonds were seen having jumped to around 101½ bid in initial aftermarket dealings and had been quoted as high as 102 bid on Tuesday.

A trader said that HanesBrands’ 4 7/8% notes due 2026 “were pretty active” in Wednesday’s trading, calling them unchanged around a 101-to-101¼ context. Around $17 million of the notes traded.

A second market source saw them at 101 1/8 bid, down 1/8 point on the day.

HanesBrands, a Winston Salem, N.C.-based marketer of basic apparel such as socks, men’s, women’s and children’s underwear and sleepwear and other casual apparel items, priced a total of $1.8 billion of new paper on May 3 in a quick-to-market two-part offering. That deal, upsized from $1.5 billion originally, consisted of $900 million of the 4 7/8% notes and $900 million of 4 5/8% notes due 2024, both of which priced at par.

Going back a little further than that, trader saw active dealings in Western Digital’s 10½% notes due 2024, calling them down ½ point on the day at 97 bid, on volume of more than $31 million.

The Irvine, Calif.-based maker of computer hard drives, had priced $3.35 billion of those notes at par back on March 30 as part of a $5.23 billion bond deal, one of the year’s largest.

It had also priced $1.88 billion of split-rated 7 3/8% senior secured notes due 2023, also at par.

The latter bonds were seen trading at 101¼ bid on Wednesday, down ¼ point, on volume of over $17 million.

‘Muted’ activity seen

While there was some active trading in those new or recent issues as well as some existing bonds, a trader characterized Wednesday’s session overall as “fairly muted again today.”

He said that part of the reason was investors waiting for the release of the April Fed minutes, which indicated that the nation’s central bank is leaning toward an increase in interest rates at its meeting next month.

“After that,” he continued, “there was a little bit of weakness, but things weren’t under significant pressure.”

Indicators head south

Statistical market performance measures turned lower across the board on Wednesday after having been mixed on Tuesday. It was the second lower session in the last four; the indicators had been higher all around on Monday, versus Friday’s lower session.

The KDP High Yield Daily index eased by 3 bps on Wednesday to end at 67.40 after having been higher the previous two sessions, including Tuesday, when it firmed by 4 bps. Wednesday was its second loss in the last four sessions.

Wednesday’s yield was unchanged at 6.23% after having narrowed for two consecutive sessions before that, including Tuesday when it came in by 2 bps. Besides having narrowed on Tuesday and on Monday, the yield rose last Friday and moved lower for three straight sessions before that.

The Markit Series 26 CDX North American High Yield index saw its second straight loss and its third such downturn in the last four sessions, retreating by almost 5/16 point to finish at 101¾ bid, 101 25/32 offered. On Tuesday, it was off by ¼ point

The Merrill Lynch North American High Yield Master II index also moved over to the downside on Wednesday after having posted two straight gains before that and five advances in the previous six sessions.

It fell by 0.019%, versus Tuesday’s 0.133% firming.

Wednesday’s retreat lowered the index’s year-to-date return to 7.276% from Tuesday’s 7.296%.

The cumulative return remained down from the peak level for the year so far of 7.398%, reached on May 2.

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